Regulatory Overview
The UAE’s foreign direct investment framework is governed by Federal Decree-Law No. 19 of 2018, commonly known as the FDI Law, along with its implementing regulations and subsequent amendments. This framework marked a historic departure from the longstanding requirement that UAE nationals hold at least 51 percent of onshore company shares.
The FDI Law operates in conjunction with the Commercial Companies Law and sector-specific regulations to define where and how foreign investors can establish and operate businesses in the UAE. The legislation introduced the concept of a Positive List, identifying sectors and activities eligible for up to 100 percent foreign ownership.
The Foreign Direct Investment Unit, established under the Ministry of Economy, administers the framework. Each emirate retains authority over licensing within its jurisdiction, and individual emirates may set additional conditions for foreign-owned businesses operating within their borders.
Key Provisions
The FDI Positive List is the centerpiece of the regulatory framework, cataloging more than 1,000 economic activities across 13 sectors where foreign investors may hold up to 100 percent ownership. These sectors span manufacturing, agriculture, renewable energy, technology, hospitality, construction, and professional services, among others.
Activities classified as having strategic impact remain subject to foreign ownership caps. The strategic impact activities list includes sectors tied to national security, public utilities, and certain financial services. The UAE Cabinet periodically reviews and updates both the Positive List and the strategic impact list.
Qualifying foreign investments benefit from several protections under the law, including guarantees against expropriation without fair compensation, the right to repatriate profits and capital, and access to the same government incentives available to domestically owned businesses.
The framework also provides for special investment agreements between the government and large-scale foreign investors, offering customized incentive packages for projects that align with national economic priorities.
Enforcement
The Ministry of Economy enforces compliance with FDI regulations through its Foreign Direct Investment Unit. This body reviews applications for foreign ownership in designated sectors and monitors compliance with conditions attached to FDI approvals.
Violations can result in the revocation of trade licenses, fines, or mandatory restructuring of ownership arrangements. Operating in a restricted sector without the required Emirati ownership constitutes a serious regulatory infraction.
Local Departments of Economic Development serve as the first line of enforcement at the emirate level. They verify ownership structures during license issuance and renewal, ensuring that companies comply with applicable ownership requirements.
The UAE has also established investment dispute resolution mechanisms, including access to international arbitration through bilateral investment treaties with over 100 countries and adherence to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Compliance Requirements
Foreign investors seeking to establish fully owned companies must verify that their intended activity falls within the Positive List. Applications are submitted through the relevant Department of Economic Development, which coordinates with the Ministry of Economy for activities requiring additional clearance.
Investors must provide proof of financial capacity, a detailed business plan, and evidence of relevant experience in the sector. Certain sectors impose additional qualifications, such as minimum investment thresholds or mandatory employment of UAE nationals.
All foreign-owned entities must comply with Ultimate Beneficial Owner disclosure requirements, anti-money laundering regulations, and economic substance regulations. Companies must maintain physical office space in the UAE and demonstrate genuine economic activity within the jurisdiction.
Annual compliance reporting includes submission of audited financial statements, renewal of trade licenses, and updating corporate records to reflect any changes in ownership or management structure.
Impact on Business
The liberalization of foreign ownership rules has reshaped the UAE’s investment landscape. Since the implementation of the FDI Law and the expansion of the Positive List, the UAE has seen a significant increase in foreign direct investment inflows, consistently ranking among the top FDI destinations in the Middle East and North Africa region.
International companies that previously operated through free zone structures or local sponsorship arrangements have gained the option to establish fully owned mainland operations, expanding their ability to do business directly with government entities and across the broader domestic market.
The reforms have intensified competition among the emirates to attract foreign investment, with Abu Dhabi, Dubai, and other emirates launching complementary incentive programs including reduced fees, fast-track licensing, and sector-specific support packages.
Small and medium-sized foreign enterprises have benefited particularly from the changes, as the elimination of mandatory local partnership requirements reduced startup costs and simplified governance structures.
Vision 2031 Alignment
The FDI regulatory framework is a cornerstone of the UAE’s economic diversification strategy under Vision 2031. The national target of attracting AED 550 billion in cumulative foreign direct investment depends on maintaining a regulatory environment that is competitive with leading global investment destinations.
The Positive List’s emphasis on technology, manufacturing, renewable energy, and professional services reflects the UAE’s priority sectors for economic diversification. By channeling foreign capital into these areas, the FDI framework supports the transition away from hydrocarbon dependence.
The UAE’s investment treaties and arbitration commitments provide the legal certainty that institutional investors require, supporting the Vision 2031 goal of positioning the UAE among the world’s top five countries for ease of doing business.
Continued refinement of the FDI framework, including further expansion of the Positive List and harmonization of emirate-level requirements, will be critical to sustaining investment momentum through 2031 and beyond.